ECONOMY

Citigroup: French proposal is no solution

A Citigroup report late on Tuesday cast doubt on the impact of the French proposal for a debt rollover and of the second Greek bailout, suggesting a ?haircut? — i.e. a reduction in interest — will be inevitable.

The report argued that these two initiatives will not resolve the country’s debt problem, but simply delay the inevitable restructuring.

“Estimated private sector haircuts will amount to 65 to 77 percent,» Citigroup said, referring to the write-downs that bondholders will be required to accept.

?In other words, a bailout package addresses the liquidity issue much more than the solvency issue,? Citigroup added.

At the same time, the French proposal and its acceptance will eventually depend on what rating agencies do and whether it leads to a new downgrade and a default, the report warned.